South Florida Construction Poses Limited Threat to Apartment Fundamentals

The amount of construction in selected areas of south Florida is increasing the risk at the time for an investment property, and even a standard pricing for a new homebuyer. The condo development has become the most attractive and secure investment in South Florida, since the new additions of the residential towers are on the rise and contractions cranes are generating uncertainty at the analysis of fundamentals.

One of the bright sides of investing in this market is the growth is constant and distributed in selected areas. “At a submarket level, the greatest risk to apartments is in downtown Miami, primarily because that’s where condo construction has been heavily concentrated. However, apartment construction has been better distributed among South Florida submarkets. As such, the threat to apartment performance should be mitigated due to greater distribution of apartment construction within the South Florida region.”

Another important factor in the Miami development, if the foreign capital investment which influences the Real estate market. Countries such as Venezuela, Brazil, Argentina, and Russia have distressed economies that keep on devaluation their currency and affecting the inner markets. “Foreign buyers view Miami’s real estate market as a more secure vehicle to park capital. And in purchasing condo units, they are able to rent these units to generate cash flow, thereby creating a shadow market. However, it is too early to determine too what degree a shadow market has materialized in South Florida as they are difficult to track.”